Market Insights & Analysis from Kramer Capital Research

Big Tech Just Can’t Carry Wall Street’s Load

For a lot of investors, technology has been the only bright spot in a miserable year of pandemic, recession and election angst. But now that light seems to be dimming.

All five of the titans at the top of the Silicon Valley food chain had a chance to thrill investors this week with their earnings. With the possible exception of Alphabet Inc. (NASDAQ:GOOG), all five failed.

The numbers were all right. On the whole, they hit Wall Street’s targets and confirmed that their business models remain relatively resistant to whatever COVID-19 and the electoral cycle can throw at them.

It is just that with the entire market weighing on five stocks, “all right” isn’t good enough. These companies needed to deliver something amazing to keep market morale from cracking.

We didn’t get it. And today’s sell-off demonstrates what happens when Big Tech hits a wall.

Big Tech Just Can’t Carry Wall Street’s Load Due to Too Much Pressure at the Top

I wasn’t optimistic when I previewed the Big Tech cycle for TD Ameritrade (watch the video here) and Bloomberg (listen here). It isn’t fun when reality lives up to your suspicions.

Microsoft Corp. (NASDAQ:MSFT) set the tone for what followed. Revenue came in roughly in line with what we expected, while profits actually beat the consensus target.

What’s remarkable about these numbers is the way they didn’t bend at all for the pandemic recession. I didn’t have to adjust my models at all to accommodate COVID-19. The bar here hasn’t moved all year.

That’s part of the general charm of technology in a pandemic year. Computers don’t get sick. If anything, sick people rely more heavily on computers while we figure out how to cure the disease. 

Microsoft and Big Tech Just Can’t Carry Wall Street’s Load

Unfortunately, while the disease didn’t slow MSFT down, management is still struggling to keep the growth curve steep. 

We needed to hear about bold and innovative new ventures. Instead, we got a confession that the 12% revenue growth MSFT achieved last quarter is coming in closer to 8% in the current quarter. 

The giant has simply expanded as far as it can into its core markets. Everyone who wants to run a Windows computer is already paying for the privilege. 

Even With Cloud Computing, Big Tech Just Can’t Carry Wall Street’s Load

And while cloud computing remains a growth center, that space is getting extremely competitive as other giants chase the same set of customers. That’s part of what kept Amazon.com Inc. (NASDAQ:AMZN) on the defensive last quarter.

Like MSFT and GOOG, AMZN needs to keep inventing new ways to squeeze money from the cloud. But while its rivals are content to create additional services to win customer loyalty, AMZN competes more on price.

That means sacrificing margins to attract revenue. And it looks like the current quarter is where that strategy is starting to hurt. AMZN isn’t going to hit Wall Street’s profit target. That stings. It definitely is not the pep talk investors were counting on. 

Big Tech Just Can’t Carry Wall Street’s Load Despite Apple and Facebook Ascending

After all, counting Apple Inc. (NASDAQ:AAPL) and Facebook Inc. (NASDAQ:FB), Big Tech is up 37% year to date (YTD). These stocks have come a long way under extremely challenging economic conditions.

Part of that strength was justified. AMZN, in particular, has responded to the pandemic extremely well, with revenue surging 37% over last year’s levels.

But hope for even better things ahead played an equally large role in the rally. Now that hope is evaporating, leaving investors with a little disappointment to digest.

Big Tech Just Can’t Carry Wall Street’s Load Without the Titans of Tomorrow

Even a little disappointment is serious business when you’re dealing with trillion-dollar stocks. Big Tech came as far as it did because each of these companies changed the world in its own way.

It has been a great couple of decades. Remember the early iPod boom? Remember the first time you ordered books online and had them sent to your house? Remember opening your Facebook account?

Investors can never look back while the market is open. The question we all face every day is even simpler. What can each of these companies do for us now?

I am much more interested in discovering the trillion-dollar titans of tomorrow, the relatively humble companies of today that can change the world in decades to come.

Big Tech Just Can’t Carry Wall Street’s Load, But IPO Stocks May Help

My IPO Edge portfolio beat the S&P 500 by an embarrassing margin this year. We’re deep in the money while other investors, stuck in a world of yesterday’s giants, are staring at a breakeven year at best.

And the fun is only getting started. Venture capital funds demand the ability to show shareholders that they can triple a starting investment in a decade. We aim to deliver at least that rate of return in a single year across the portfolio… and a few of my stocks are already in triple-digit-percentage territory.

Want hints? I often tease a favorite name on my Millionaire Maker radio show. Now, there’s a podcast as well to keep you focused on opportunities to build real wealth while avoiding obvious threats. (Click here for a list of stations and archived episodes.)

Cannabis Corner: Widen Your Horizons

Believe it or not, a well-constructed cannabis portfolio is now beating the S&P 500. You just need to look past the established cultivators that got too far ahead of themselves and will need years to recover.

I track eight significant cannabis stocks. On average, the group has surged a healthy 11% YTD while the broad market has erased all the progress made over the last 10 months.

But averages can be misleading. All of the group’s net gains come entirely from two names that only found a place on Wall Street’s radar over the summer. 

Green Thumb Industries Inc. (OTC:GTBIF) was under $10 when this wild year began. Now, it’s gearing up for its next test above $16. 

And GrowGeneration Corp. (NASDAQ:GRWG) has quadrupled in value over the same period. If you were in either of these stocks, you’re probably having a great year.

Unfortunately, most cannabis investors are not feeling so great. Factor out GTBIF and GRWG and the other stocks on my industry screen are down anywhere from 11% to 84% so far in 2020.

I’m talking about the big cultivators like Canopy Growth Corp. (NYSE:CGC), Tilray Corp. (NASDAQ:TLRY) and Aurora Cannabis Inc. (NYSE:ACB) that are featured in exchange-traded funds and other size-weighted portfolios.

These stocks are much more widely held. They’re swollen with money from speculators who couldn’t figure out any other way to get exposure to what still looks like a deregulation boom.

Their commodity-driven business models just don’t work. But GTBIF is something new, selling value-added cannabis products at higher price points. 

And GRWG sells hydroponic gardening supplies to entrepreneurs looking to cash in on the green gold rush. No matter who grows the crop, this company participates in the buzz.

Revenue doubled this year. And at this scale, GRWG is already profitable. The big farmers can’t say that.

The moral here is simple. While any new business category will initially look like an entrepreneurial free-for-all, ultimately only a few winners will be left standing.

Even with vast venture capital backing, most untested business models will still fail. You want to make sure your portfolio has enough space for the winners that you can weather the failures.

Then, when the competitive smoke clears, you’re not looking at a total loss. I use a variant of this system for my IPO Edge subscribers. I urge you to take a look.

Finally, I’m thrilled to announce that my Pre-Election Stock Profit Summit got picked up by the Global Financial Wealth TV Network. Click here now to watch it!

Update on Private, ‘Off the Record’ Post-Election Summit

Finally, we are really excited to let you know about what is the first actual, in-person get together we’ve had since very early this year, and it is the just-confirmed, just-verified and ready to rock and roll financial event of this post-lockdown year.

Today, we are cordially inviting you to our private, in-person “off the record,” financial summit sponsored by the Investment Club of America. This confidential meeting will take place on Nov. 6-7 (right after the elections) in an undisclosed location in Las Vegas.

Why is this gathering so secretive? Because our First Amendment rights are being abridged by power-hungry politicians, and we need to maintain a low profile in an era of big government.

We live in dangerous times, in which our freedoms and wealth are threatened as never before. The November 2020 election has become the most important election of the 21st century due to the stark differences between the two parties. Trump and the Republicans are struggling to maintain power in the face of a never-ending pandemic. Their policies of tax cuts, deregulation and appointing conservative justices could be overturned soon.

As it stands today, the election betting odds still favor the Democrats. If the Biden/Harris ticket wins and the Democrats take over the House and the Senate, what will this mean for investors, entrepreneurs and the citizens of America? Will the stock market crash and gold soar?

Biden & Co. have promised massive tax increases on wealthy entrepreneurs, elimination of the long-term capital gains ‘break’ on stocks, bonds, gold, silver and real estate (with tax rates exceeding 50%).

They have also promised socialistic programs like Medicare for All, free college tuition, a New Green Deal, a wealth tax, severe limitations on free speech, a new Supreme Court, all on top of out-of-control government spending. The Great Suppression has begun!

That’s why we are holding this Post-Election Summit. It is critical to your pocketbook and your way of life.

And to help make sense of it all, we have brought together some of the world’s top experts to discuss the outcome of the November elections. What will it mean in terms of our citizens’ rights to speak out, to run our businesses, to invest, to travel, to assemble and to be left alone?

Will our freedoms and standard of living be curtailed due to new government policies? Will our wealth come under attack with new taxes, inflation and regulation? Will tech and gold continue to be the favorite stocks after the November elections?

We have brought out the best and the brightest analysts in finance, economics and politics to provide their analysis and answer your questions.

The Post-Election Global Financial Summit is an “in person,” face-to-face event — not a “virtual” conference. Due to legal restrictions, attendance at this in-person event will be limited. We urge you to register now and not be disappointed.

The price for this two-day event is $299. There are no discounts and we expect to sell out quickly. To learn more about the conference, go to https://globalfinancialsummit.co/.

After you register, you will be given the name and location of the Las Vegas hotel, and you then can reserve your room and make your travel arrangements. The hotel is only $99 per night, plus tax. There is no resort fee. Parking is free. We arranged a great deal for you!

Special Note: Please do not discuss this conference on social media. This is a private conference by special invitation only. Thank you.

Our Confirmed Speakers for This event:

Mark Skousen, veteran editor of Forecasts & Strategies and the producer of FreedomFest, will analyze the impact of the November elections on the economy, the dollar, taxes and your wealth. He will give specific recommendations — what to buy, what to sell and what to expect in the next year for stocks, bonds, the dollar, real estate and commodities.

Jo Ann Skousen, associate editor of Forecasts & Strategies and director of the Anthem Film Festival, will discuss her greatest concerns for the future — the protection of the twin pillars of freedom.

John Fund, senior editor of National Review and the nation’s foremost authority on politics and elections, will assess the good, the bad and the ugly coming out of the November elections.

Sean Flynn, economics professor at Scripps College (Clermont) and principal author of the top economics textbook in the country, will assess the “New Normal” after the elections — how to survive and prosper in an age of higher taxes, growing deficits and more regulations. As the author of “The Cure That Works,” he will update us on the future of health care and the pandemic.

Jim Woods, known as the Renaissance Man, the #1 financial blogger in the world according to Tip Ranks, and co-editor of Fast Money Alert with me, will discuss his favorite investment strategies for 2021.

Hilary Kramer, editor of the popular 2-Day Trader, a talk show host and a graduate of the MBA program at the Wharton School of the University of Pennsylvania, will discuss how the November elections will be a “GameChanger” (the title of her most popular book that was #1 on Amazon this year and was also on the Wall Street Journal bestseller list).

Bryan Perry, editor of the prestigious Cash Machine advisory service, will offer his best post-election investment choices in high-tech and high-income.

Adrian Day, founder of Adrian Day Asset Management and the world’s top authority on global investing and mining stocks, will offer specific advice on the outlook for global investing, the dollar, and commodities, with specific recommendations from blue-chip miners to penny stocks that are likely to double or triple in the coming year.

We just confirmed Barbara Kolm, Vice President of the central bank of Austria, who will give us an update on Europe.

More speakers will be added soon and Roger Michalski, publisher of Eagle Financial Publications, will moderate.

Time is short, and now is the time to act if you wish to be part of this historic gathering. Attendance is strictly limited, so sign up today at https://globalfinancialsummit.co/.

Which company is at the forefront of “The Final Human Frontier”?
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GameChanger Investing

Which business will transform the aging world and bring investors life-changing profits? Hilary Kramer knows. She reveals the name of this company – “The Final Human Frontier: An Aging World” – and much more in her blockbuster new book, GameChanger Investing: How to Profit from Tomorrow’s Billion-Dollar Trends.

To get a FREE e-copy of the chapter naming “The Final Human Frontier: An Aging World,” simply tell us where to send it in the box below.

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